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Indian domestic auto sales continue to slump; no immediate respite
Economic Times, 11 Jul '19

Domestic PV sales in India continue to slump with passenger vehicles witnessing the highest decline of 17.5% to 225,732 units in June 2019. The overall sales for the segment were reported at 273,748 in the same month last year.

It is to note that for the first time in over a decade, the downfall in passenger vehicle segment has continued for a year.

"Consumer sentiments remain sheepish which continue to weigh on demand for discretionary items like cars. Moreover, inventory rationalization at PV dealerships has taken a toll on wholesale dispatches. We expect some signs of recovery from the festive season," said the vice-president of a rating agency.

"Government's push to recapitalize banks and improve liquidity in NBFCs is positive for the economy, benefits of which will start reflecting in next few quarters," he further added.

However, no immediate respite is expected for the current situation.

All the segments of Indian auto market remain in red for the month of June. Two-wheeler sales dipped 11.69% to 1,649,477 units as compared to 1,867,884 units in June 2018. Commercial vehicles also declined 12.27% last month to 70,771 units.

"Seventh consecutive month of volume degrowth for two wheelers in domestic market during June 2019 continues to reinforce the weak consumer sentiments. This emanates from limited employment generation in urban areas which coupled with delayed monsoons as well as supressed farm cash flows of rural customers has resulted in post ponement of discretionary purchases," said the vice-president of a rating firm.

According to a senior analyst at a forecasting firm, diesel transformation is biggest factor hurting the industry. "Demand is stuck because OEMs are facing a challenge that diesel consumer is not stepping in the showroom and there is lesser acceptability of diesel vehicles. OEMs have to transfer all the demand to petrol engines where the consumer is not getting good options," he said.

On a quarterly basis, passenger vehicle sales slid 18.4% to 712,620 units in April to June this fiscal.

Two wheeler sales declined 11.68% in first quarter of financial year 2018-19 to 5,014,071 units as against 5,677,343 units in the quarter under review last year.

Commercial vehicle sales stood at 208,298 units in the quarter ended June as compared to 230,236 units in the same quarter last fiscal, a dip of 9.53%.

Auto industry has expected reductions in GST rates to spur demand and stabilize the domestic market, however, GST reduction found no mention in the recently proposed budget.

Overall retail sales also followed downward trajectory with a dip of 5.73% to 1,674,318 units.